Steinberg: Sports Tradex a bright idea

Leigh Steinberg

The race to create new ways for fans to enjoy interacting with sports continues. It is evocative of the Oklahoma Land Rush, with innovators competing to create the next new niche that delivers an experience that is novel and fun.

The 800-pound gorilla in the field is the $1.5 billion fantasy sports market. The number of participating fans continues to explode exponentially. Reports of thousands of fans who participate from their computer at work are an indication of the burgeoning fantasy mania.

Years ago my former partner Jeff Moorad, technologist Mike Kearns and I talked about the concept, which they later developed, of a stock market speculating on the value of players.

An enterprising young company has a new twist on the sports speculation experience, which combines fantasy sports and finance and mobile gaming.

Sports Tradex, founded by Houston-based CEO Benjamin Lipson, is a virtual futures market or stock market for teams and players. Users on the site buy and sell players to predict sports outcomes or performance and compete for cash prizes.

What is novel is the ability of the users to be active in real time during games. As the action continues to develop, fans can trade their positions.

"This is a constantly fluctuating market that is different than picking a team or player or players to win," Lipson said. "Our users can be active during the game."

Users sign up for free and get 5,000 units of virtual currency. With this currency, users can enter contests, many of which are free. Some contests have a fee to sign up, usually between $5 and $25.

Depending on the contest, currency can be used to invest in different players to create a fantasy team or can be used to invest in an entire team the user anticipates to be the most profitable. Suppose a player were to break his arm during the contest, a user can trade their units in that player, but the value of the units will drop if everyone tries to sell them at once, emulating a stock exchange. In certain contests, the player who aggregates the most virtual units can win cash prizes.

The site also offers some unique content in the form of user generated probabilities. For example, the Sports Tradex market gives the 49ers a 65% of winning the Super Bowl and the Ravens a 35% chance.

The company likes to compare their predictions with other sources, like Accuscore and Vegas lines. As of this writing that prediction differs from the betting lines. The points on the 49ers continue to drop as fanatic Ravens believers are in a betting frenzy.

There will be stiff competition between fantasy sports sites. The derivations will continue to develop with numerous start-ups involved. There are websites like Star Street Inc. that allow users to play for just one day, buy and sell shares, and win cash prizes. This doesn't include employer user-generated market prices.

The trend for innovation and new start-ups is similar to the Internet craze of the 1990s. But unlike that period, where there was a difficulty in proving revenue flow and money came from IPO's and investor dollars, the advertising model is expanding.

Players in these competitions can play on their computers or tablets during games, and soon this will expand to mobile applications so users can trade easily on hand-held devices.

Sports Tradex currently has contests for Major League Baseball and the NFL, but certainly will roll out in all major sports.

As in the 1990s, the survivors in this start-up fight will be those companies with astute management, adequate financing and financial controls, and holistically imagined business models.

The land rush will continue and the best and brightest will quickly find the most profitable parcels. Those companies that are flawed in one of the prior categories may find themselves stuck at the starting line.